J. Loyd Capital Management, LLC

Professional Investment Advice & Planning

7777 Bonhomme Avenue, Suite 1800 Clayton, MO 63105

(314) 669-6654

DISCLAIMER

J. Loyd Capital Management, LLC is a registered investment adviser offering advisory services in the State of Missourri, Illinois, and in other jurisdictions where exempted. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by our firm in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

CONTENT

All written content on this site is for information purposes only. Opinions expressed herein are solely those of J. Loyd Capital Management, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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This website may provide links to others for the convenience of our users. Our firm has no control over the accuracy or content of these other websites.

The Growth Delusion

September 13, 2017  /  Jason Loyd

The battle wages on between a hot stock market and a "meh" economy. Click on the tube and our well intentioned pundits act as if a mere uptick is the newsworthy equivalent of hurricane Irma. Oh the vanity in such effort! Of course, the US markets are in fact hovering in record territory, but are they really as hot as so many declare?

Indeed US returns are high, but sector and style participation is uneven - the reverse of a bull market. Major averages have been slung up mainly by a cyclical bounce in "Growth" style companies. Growth stocks are companies that normally trade with higher valuations, earnings, and sales growth factors. (Think Facebook, Amazon, etc.) So far in 2017, "Growth" stocks have trounced our modest and beloved "Value" companies. As of today, the Morningstar Large Cap Growth index is up over 21.8% while the Morningstar Large Cap Value index is up a lonely 5%. Small Value companies haven't done much either, with the Russell 2000 Value now under 1% year-to-date. So lately, it really is all about that Growth. 

Growth Stocks Vs. Value Stocks

Source: Morningstar, Inc.

Now to be very clear, we see nothing wrong with Growth stocks. In fact we own a few. However, we remain confident in our Value/Dividend slanted process for the long term. Here are few reason why:

  1. Better Returns - Over the long term, Value companies have significantly outperformed Growth. $1.00 invested in 1927 in Value stocks, would be worth $7,662 by 2005, and only $974 in Growth. (Fama & French 2006 study.)

  2. Less Volatility - Growth stocks are typically based on greater assumptions than Value, and thus can be subject to swifter declines. Morningstar's Large Cap Growth Index has a 10 year standard deviation of 16%, while their Large Cap Value sits under the S&P 500, at 14%.

  3. Seasons - Growth stocks normally outpace in a momentum based cyclic manner. However, going back to 1928 - Value has outdone Growth roughly 3 out of every 5 years. 

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
— Benjamin Graham

Indeed, most of this is pure common sense, but we know the markets do not always operate as such.

As always, we're here for your questions! - JML

DISCLAIMER - J. Loyd Capital Management, LLC is a registered investment adviser offering advisory services in the State of Missouri, Illinois, and in other jurisdictions where exempted. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by our firm in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.

CONTENT - All written content on this site is for information purposes only. Opinions expressed herein are solely those of J. Loyd Capital Management, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

LINKS - This website may provide links to others for the convenience of our users. Our firm has no control over the accuracy or content of these other websites.